Moderate sub-trend growth continues across the emerging market economies of East Asia (S Korea, Thailand, Taiwan, Malaysia, Indonesia, Singapore, HK and Philippines). Lack-lustre growth in world trade has dampened activity in this export-oriented region but domestic demand has held up better than in previous export slowdowns.

Regional GDP expansion has settled at just below 4% yoy since mid-2013 and we expect growth to trend upwards to around 4½% by the latter half of 2016. Malaysia, the Philippines and Indonesia should grow the fastest.

There are big differences between the region’s economies, reflecting the diversity of political, financial and economic structures across the region. Political instability has hit the Thai economy and growth forecasts have been revised down. Indonesia remains one of the fastest growing regional economies but its reliance on foreign capital inflows shows its continued vulnerability to shifting risk appetites in global financial markets.

Economic policy varies across the region. Above target inflation, a weak currency and external deficits led to interest rate rises in Indonesia. The Malaysian central bank has signalled that its next interest rate move is probably upwards. Below target inflation in S Korea underpins ongoing low interest rates and Taiwan’s low inflation puts its central bank in a similar position. The Thai economy is weak and inflation is forecast to remain within its target band but interest rates are already low and the Bank of Thailand sees little room for more cuts. Singapore’s central bank continues its monetary tightening via currency appreciation.

Below trend economic growth in the Asian emerging market economies has led to only modest expansion in regional import demand and that, along with the downward trend in bulk resource commodity prices, has led to a stagnation in Australian goods exports to the region.

About the Author

Tom joined NAB in 1996 after working for the Australian government within both the Federal Treasury and the Department of Foreign Affairs and Trade. Prior to this, Tom gained experience within the wool industry.

At NAB, Tom heads up the international economics team and is responsible for forming the banks views on economic conditions in the global economy. He manages the monitoring and forecasting of numerous economies around the world, with a particular focus on the US, China, emerging Asia, UK, Euro-zone and New Zealand. Tom studied economics at the University of Wales, where he also completed his PhD.